Health Insurance Definitions

To make good health insurance decisions, you need to understand the terminology that describes major features of the health insurance plans. We offer this brief glossary as a guide to health insurance in California, including the North County Inland and North County Coastal regions of San Diego County.

Annual Deductible:

A set amount that the health insurance consumer must pay out of pocket over the course of one year before the health insurance company begins to pay benefits.

Coinsurance:

The percentage of a healthcare bill that the health insurance policyholder must pay for services rendered.

Co-payment:

Common among HMOs and PPOs, a co-payment is a flat fee that the health insurance consumer must pay for specific medical services or prescription medications. The health insurance policyholder must pay the co-payment amount at the time the medical service is provided or the prescription drug is purchased. For example, a health insurance plan may require a co-payment of $15 for a doctor’s office visit. The health insurance plan covers the remainder of the charges.

Covered expenses:

Those healthcare services, procedures, medications, and supplies paid for by your health insurance provider.

Flexible spending account (FSA):

A type of savings account into which a healthcare consumer and the consumer’s employer can deposit pre-tax earnings. Funds in the account must be used to pay for health insurance and/or medical charges not covered by the employer’s health insurance plan. FSA funds must be used within the benefit year or be forfeited-a major difference from an HSA (see below).

Group health insurance:

A health insurance plan that provides health coverage for several individuals. Most group plans are purchased by an employer to provide health insurance for its employees and members of the employees’ families.

Health Maintenance Organization (HMO):

An organization that provides medical services to healthcare consumers through a network of medical professionals who have agreed by contract to screen, diagnose, and treat patients according to certain guidelines. Plan members must seek medical attention within the HMO network in order to be covered by the plan.

Health savings account (HSA):

A kind of savings account into which a healthcare consumer and/or his or her employer deposits pre-tax funds for the purpose of paying for medical expenses. Funds deposited in an HSA account are sheltered federal and state income tax and Federal Insurance Contributions Act (Social Security and Medicare) tax. Unlike funds deposited in an FSA, funds deposited an HSA can roll over, tax free, from one year to another. The funds must be used to pay for medical fees, drugs, or supplies, before age 65. After age 65, the funds can be withdrawn for any purpose. The holder of an HSA account must be enrolled in a High Deductible Health Plan (HDHP). The minimum deductible of an HDHP is $1,100 for an individual or $2,200 for a family.

Maximum out-of-pocket expenses:

The maximum amount of money the health insurance consumer must pay toward medical costs before his or her health insurance provider takes over 100 percent of the medical fees and costs. Out-of-pocket expenses include deductibles, coinsurance, and co-payments.

Medical savings account (MSA):

An MSA is a savings account that allows self-employed individuals and employees of small businesses to set aside funds to pay for medical charges that are not covered by standard health insurance.

Medicare:

A program of the U.S. government that uses taxpayer dollars to provide health insurance to qualified people. To qualify for Medicare health coverage, an individual must have a disability or be 65 years old. Medicare offers two health insurance plans: Part A and Part B. Funded solely with taxpayer dollars, Medicare Part A pays for hospitalization. Part B, which is funded both by the Medicare policyholder and the government, pays for basic medical services. Part B is also known as Medicare Supplement.

Portability:

The ability of a consumer to move from one health insurance plan to another health insurance plan without restriction, regardless of preexisting medical conditions.

Point of service health plan (POS):

A health insurance plan that combines elements of a Health Maintenance Organization and a Preferred Provider Organization. With a POS health insurance plan, the policyholder chooses a primary care physician, who becomes the ‘point of service.’ The POS policy pays for both in-network and out-of-network services, although it pays more for in-network services. In addition, the paperwork for in-network medical services is handled for the consumer. If the policyholder goes outside the network, he or she is responsible for completing all forms, submitting all bills for payment, and for keeping account of the healthcare receipts.

Preferred Provider Organization (PPO):

A managed care health insurance plan that offers coverage at reduced rates for visits inside its network of physicians and medical facilities, but also pays for services obtained outside the network. The policyholder is responsible for a greater portion of the medical expenses when he or she visits a doctor, lab, or clinic outside the network of preferred providers.

Preexisting condition:

A medical condition such as diabetes, asthma, or obesity that has been diagnosed before a consumer attempts to enroll in a health insurance plan. By law, health insurance providers are allowed to declare a waiting period before covering the treatment of preexisting conditions. In California, health insurers can deny coverage for preexisting conditions.

Supplemental health insurance:

A health insurance policy that covers medical expenses not covered by a primary health insurance policy.